Andrew Caplan
Aluminium
This presentation has been prepared by Glencore Xstrata plc ("Glencore").
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Aluminium overview
Glencore assets and ownership
• 100% of Sherwin Alumina
– 2012 production: 1,379kt
• 46.6% economic interest and further 10.3% interest through total return swaps in Century Aluminum
• 8.8% of UC Rusal
A leading supplier in the global alumina and aluminium markets
• 2012 marketed volumes exceeded 11.5Mt
Industrial assets comprise an alumina refinery and shares in two listed aluminium companies, operating in five regions and 62 countries
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Divisional reporting structure
CEO
Ivan Glasenberg
Alumina / Aluminium
CFO
Steven Kalmin
Industrial/Marketing
Andrew Caplan
Supporting
Group Functions
Assets
Daniel Goldberg
Treasury,
accounting, tax
Sherwin Alumina
HR
Marketing
Columbia Falls
(currently idle)
Europe (Baar)
Americas
Stamford
Asia
Singapore/Tokyo
China
Beijing
IR/Corporate
Affairs
SD
Legal, compliance
Procurement
Risk management
Internal audit
IT
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Sherwin Alumina (100%)
Location
• Corpus Christi, Texas, US
Operational details
• Constructed in 1953
• Production capacity: 1.6Mt
• Storage capacity: 89kt
• Produces smelter and chemical grade alumina
• Utilises US natural gas as energy source
• Access to a deep water port for incoming bauxite
and outgoing alumina
• Purchased in 2007. Substantial restructuring and
investment since:
- reduced headcount by ~200
- increased maintenance spending
- increased calciner capacity
- replaced port infrastructure
Future projects/strategy
• Creep back to nameplate capacity
• Capitalise on US energy renaissance
• Invest to modernise facility and reduce cost
Sherwin Alumina Plant
Production profile (kt)
1,800
1,600
1,400
99%
92%
86%
78%
1,200
1,000
800
600
400
2010
2011
2012
2013E
Capacity
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Century Aluminum (46.6%)
Overview
• Listed – NASDAQ
• Head office in Chicago
• Smelters in the US and Iceland
Operational details
• 5 aluminium smelters
• 2 carbon facilities
• 1 product casthouse facility
• Recently completed acquisition of Sebree smelter from
RTA for US$ 67M, including working capital
• Restructuring US-based electricity contracts to market
based pricing
• Consistent with leveraging the US energy renaissance,
successfully moved Hawesville to market power pricing in
August 2013 with Sebree to follow in January 2014,
expected to save $100 mm in combined powers costs as
result
Future projects & priorities
• Progress expansion projects in Iceland
• New anode plant in Vlissingen to be operational in 2014
for supply of anodes to Iceland
Relationship with Glencore
• Glencore supplies alumina and purchases aluminium on
long and short term contracts
• Currently three Glencore directors on the board of
Century
Grundartangi
Historical aluminium shipment profile (kt)
660
640
75%
78%
82%
2010
2011
2012
620
600
580
560
540
Capacity
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UC Rusal (8.8%)
Overview
• Largest aluminium producer in the world
• Listed on HKSE
• Operations in 19 countries across 5 continents;
headquartered in Moscow, primary facilities in
Russia
Operational details
• 8 bauxite and nepheline ore mines
• 11 alumina refineries
• 14 aluminium smelters
• Casthouse business and 4 foil mills
• 27.8% interest in Norilsk Nickel
Future projects
• Construction of Boguchanskoye Energy and Metals
Complex with RusHydro
• 3,000MW hydropower plant
• 600ktpa aluminium smelter
• Construction of Taishet smelter with design capacity
of 750ktpa
Relationship with Glencore
• Largest purchaser of Rusal’s exportable alumina and
aluminium
• Sales conducted through various commercial
agreements at market pricing
• Glencore appoints a Director to Rusal’s Board and
has representation on the marketing committee
Smelter potline
Historical production
kt
2010
2011
2012
Aluminium
4,083
4,123
4,173
Alumina
7,840
8,154
7,477
Bauxite
11,798
13,473
12,365
81
81
86
Aluminium foil
and packaging
products
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Aluminium marketing
Alumina/Aluminium marketing value chain
Mining
Bauxite mining
 Supplier
agreements in
place, including offtake agreements
 Maintain dialogue
with owners /
operators of mines
to ensure a deep
understanding of
global supply
Bauxite marketing
Storage and freight
Purchase bauxite
and sell to
alumina refineries
 Risk exposure is
reduced through
matched
physical
contracts
 Supply of
bauxite used as
an avenue to
originate
alumina offtakes
Alumina refinery
Bauxite refined to
alumina
 Tolling
arrangements and
off-take
agreements
provide stable
supply and market
visibility
 Involvement in
refining enables
Glencore to secure
supply, help swing
production and
manage shipping
schedules
 Glencore owns
8.8% of UC Rusal
providing alumina
under off-take
agreements and
increasing visibility
over the wider
market
Alumina marketing
Storage and freight
Purchase alumina
for sale to
aluminium
smelters
 Few global
suppliers /
customers
 Maintain
relationships with
the key industry
players
 Hedge exposure
by contracting on
a matched basis
or taking hedges
against LME
aluminium price
 Greater capacity
than many
competitors for
storing /
transporting
alumina, allowing
for geographic
and time
arbitrage
opportunities
Aluminium
smelter
Aluminium marketing
Alumina is
processed into
aluminium
 Columbia Falls
(currently idle)
 Large stake in
Century Aluminum
 Rusal supplies
aluminium under
off-take
agreements and
Glencore’s
presence on the
marketing
committee
provides valuable
insight into the
global market
Purchase and sale
of aluminium
 Trade physical
metal at prices
relative to LME plus
margin
 Physical positions
are hedged to
reduce price risk
 Acquisition of
Pacorini’s metals
warehousing
business reinforces
Glencore’s
worldwide
distribution and
logistics network
Storage and freight
Consumer
Consumers include
fabricators and end
users
 Long-term
relationships are
maintained with a
large customer
base to understand
industrial demand
factors
 China is currently
able to meet
aluminium demand
domestically, but is
still a net importer of
alumina
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Market update – short-term outlook
Alumina
• Short term risk of price move to upside: uncertainty regarding the future of Gove
alumina refinery in Australia and uncertainty regarding the continuation of export of bauxite
from Indonesia present upside risk
• Implementation of the 2104 Indonesian export ban could aide in supporting the alumina
floor owing to the increased cost of the substitute feedstock for the Chinese alumina
production
• Short term risk of price move to downside: if low aluminium prices force smelter
production cuts, the alumina market could very quickly move into surplus
• Cancellation of the 2104 Indonesian export ban could accelerate the price decline owing to
the ready availability of cheap feedstock for the Chinese alumina production
• Limited ability to store alumina (only in China in bags) means alumina market is still driven
by supply / demand fundamentals
• The Chinese market is quick to react to international price moves: international price down
= import more and consume less domestic production; international price up = sell
international cargo earmarked for import and consume more domestic production
• Alumina price range bound in a $310 / $340 range in the short term
Aluminium
• LME warehousing consultation process creates potential downside premium risk and
premium volatility
• Steep forward price curve within a low interest rate environment allows for high yielding
cash and carry trades possibly providing support for world wide premium levels
• Low price environment leading to smelter shutdowns bears potential for short-term
geographical premium arbitrage opportunities
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Market update – medium/long-term outlook
Alumina
• Current alumina price below marginal cost of production is not sufficient to attract
investment to the industry
• Limited new capacity outside of China
• Chinese bauxite quality decreasing/cost of imported bauxite increasing + Chinese
currency appreciating = Chinese cost of alumina production appreciating
• Overall bullish alumina price in the medium / long term. The question, as always, is the
timing
Aluminium
• Long term growth story for global aluminium consumption
• Expectation of stronger demand across the globe but not sufficient to create
substantial price increase unless the industry rationalises through unprofitable smelter
shutdowns
• Low LME prices mean many smelters losing money
• Premium landscape to remain supported by contango and low interest rates
• Continuation of shift in capacity from eastern to western China
• Long term price prospects to exceed medium term forecasts
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